INTERNATIONAL BUSINESS

INTERNATIONAL BUSINESS; Europeans Move Toward Backing German to Lead the I.M.F.

By JOSEPH KAHN

Published: February 15, 2000

WASHINGTON, Jan. 14—
The European Union appears set to back a German finance ministry official to head the International Monetary Fund, giving a boost to a candidate Clinton administration officials privately argue is ill-suited for the job.

European foreign ministers, meeting in Brussels today, reached an informal consensus that Caio Koch-Weser, 55, a longtime World Bank official who currently serves as a state secretary in the German finance ministry, should succeed Michel Camdessus as director of the monetary fund, German and European Union officials said after the meeting.

The French, who had been viewed as cool to Mr. Koch-Weser, issued a statement saying that they would not block a European choice.

The Brussels meeting was a success for Germany, which has sought to foster a sense of inevitability about Mr. Koch-Weser's bid to take over the I.M.F.'s leadership. Though European foreign ministers sent signals today that they had rallied around the German choice, they put off until at least Feb. 28 any official declaration that the European Union would put its political muscle behind his candidacy. That gives Germany two weeks to rally support for him without risking a loss of face by the Europeans if it were unable to do so.

The turn of events is considered a setback for the Clinton administration. It publicly remains neutral on Mr. Koch-Weser. But the administration has made clear that it would prefer that Europe, which has customarily named the head of the monetary fund, find someone who is better known internationally and who has more experience managing currencies and setting overall economic strategy. The quiet disagreement has persisted for four months.

The leadership change at the monetary fund comes at a sensitive time. The fund, which is based in Washington, has more influences than ever before over capitalist-oriented economies worldwide. From Indonesia to Russia, the I.M.F. not only provides billions of dollars in aid and helps shape economic policies, but can also affect the political fortunes of leaders who defy its lending conditions.

Its operations have been under a microscope. The fund has been criticized for mismanaging multibillion-dollar aid programs for Russia and, most recently, Ukraine. Members of Congress have expressed concern that money provided by the fund feeds corruption in those countries.

The Clinton administration has also pushed for changes at the I.M.F. Secretary of the Treasury Lawrence H. Summers has argued that the fund should focus more on preventing or combating financial emergencies and less on alleviating poverty, a task he says is better handled by the World Bank. Mr. Koch-Weser, who spent 25 years at the World Bank as a specialist in poverty relief, is not regarded as having the right resume to carry out such changes.

Still, the United States and many developing countries are watching from the sidelines as Europe fumbles its way toward nominating a successor to Mr. Camdessus. While there is no ground swell of support for Mr. Koch-Weser, he remains the only public European candidate for the job after months of debate. Germany's steadfast campaign to put him in office appears to be wearing down the French, who had earlier declined to offer any signal they would back Mr. Koch-Weser.

He has also spoken out in his own cause, blaming an arcane political process in Europe for harming his candidacy. In a recent interview, Mr. Koch-Weser said his fluent English and leadership experience at the World Bank made him a good choice to increase political support for the monetary fund at a time it is under pressure to become more responsive to social and environmental issues.

''What the fund needs is a chief executive who can get its message across and increase support,'' he said. ''I do not think it needs a technocrat who is more like a chief financial officer.''

While the outcome is still uncertain, it seems increasingly likely that the United States will have to choose between accepting Mr. Koch-Weser or using its standing at the I.M.F. to oppose him, perhaps in alliance with some developing countries. Washington would have to weigh the importance of finding what it considers an ideal candidate for the post against the costs of straining relations with European allies.

A senior administration official said today that the United States would in principle back a European choice for the job, provided that person enjoyed broad support not just in Europe but also in the developing countries.

The signal from Brussels came the same day that Mr. Camdessus, the Frenchman who has led the monetary fund for 13 years, formally retired as managing director. Stanley Fischer, the American who served as the No. 2 I.M.F. official, automatically became acting director.

Mr. Fischer, 56, who has taught at the Massachusetts Institute of Technology, has long managed the daily operations of the I.M.F. and has shaped its financial-bailout packages for Asian and Latin American countries in recent years.

''You should not be worried at all about the health and the efficiency of the I.M.F. during this interim period,'' said Mr. Camdessus, speaking at a conference in Bangkok, Thailand, during his final day on the job.